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DATE
Wednesday, July 16, 2025 at 11 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Daryl Bible
Chief Financial Officer — Steve Wendelboe
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TAKEAWAYS
Stress Capital Buffer (SCB): SCB declined from 3.8% to 2.7% as a result of the recent Federal Reserve stress test, reflecting improved risk management.
Share Repurchases: $1.1 billion in share buybacks executed, reducing shares by 5.7% over the first half.
Diluted GAAP EPS: $4.24 GAAP diluted earnings per share, rising from $3.32 in the prior quarter; GAAP net income was $116 million, down from $584 million in the prior quarter due to notable items.
Net Operating Earnings Per Share: $4.28 net operating earnings per share, up from $3.38 in the prior quarter, with net operating income of $724 million versus $594 million in the linked quarter.
Net Interest Income: $1.72 billion net interest income, up 1% quarter-over-quarter; Net interest margin was 3.62%, decreasing by four basis points, primarily from $17 million catch-up premium amortization on tax-exempt bonds and a five-basis-point increase in funding costs.
Loan Growth: Average loans and leases increased by $600 million to $135.4 billion, with consumer and residential mortgages growing $1.5 billion, or 3% sequentially; CRE loans declined 4% to $25.3 billion.
Deposit Growth: Average total deposits rose $2.2 billion, reaching $163.4 billion; Average brokered deposits declined by $300 million to $10.5 billion.
Fee Income: $683 million non-interest income, with mortgage banking revenues at $130 million and trust income at $182 million, both increasing sequentially.
Efficiency Ratio: Improved to 55.2% from 60.5% in the prior quarter, supported by a $79 million reduction in non-interest expenses.
Net Charge-Offs: $108 million net charge-offs; non-accrual loans increased $33 million to $1.6 billion.
Allowance for Loan Losses: Ratio decreased two basis points to 1.61%, reflecting lower criticized loans.
Criticized Loans: Criticized loans decreased, with CRE criticized balances down $813 million.
CET1 Ratio: Ended at an estimated 10.98%, down from 11.5%, attributed to high share repurchase activity.
Full-Year Guidance Updates: Net interest income outlook lowered to $7 billion-$7.15 billion; net interest margin expected in the mid to high 360s basis points; average loan growth forecasted at $135 billion-$137 billion; expenses expected to trend toward lower end of $5.4 billion-$5.5 billion; net charge-off guidance improved to less than 40 basis points.
Commercial Credit and Sales Process: Management confirmed enhancements implemented earlier in the year to drive long-term specialty segment growth and scale risk management.
CRE Outlook: CRE pipeline reported at over $5 billion with management indicating growth is unlikely in the next quarter but expressing a chance for positive growth toward year-end.
Dividend Policy: Management indicated the board will take “some action” on dividend in the current quarter, following a question on prioritizing dividend increases alongside buybacks.
Non-Interest Income Guidance: Expected to reach the high end of the $2.5 billion-$2.6 billion range, excluding notable items, with management citing strong performance and underlying trends in trust and sub-servicing businesses.
Acquisition Activity: Management acknowledged ongoing evaluation of M&A opportunities but suggested the pace and timing will prioritize cultural and credit fit, and CRE concentrations will be actively managed as needed.
SUMMARY
Capital flexibility improved as M&T Bank Corporation’s SCB dropped materially to 2.7%, enabling accelerated buybacks and supporting a CET1 ratio near 11% despite substantial capital returns. Management lowered the full-year net interest income range due to observed softness in commercial and CRE loan growth, while sustaining deposit and expense discipline as evidenced by efficiency ratio improvement and continued deposit expansion. Elevated fee income, particularly in trust and treasury management, and increased sub-servicing in mortgages contributed positively to non-interest revenue momentum. Management also affirmed a strengthened risk management focus with ongoing commercial loan process enhancements and criticized loan reductions. Market-facing strategy will remain cautious until loan growth fully materializes, with guidance highlighting persistent selectivity in capital deployment between buybacks and dividends, careful credit underwriting practices, and opportunistic engagement in acquisitions strictly when fitting the bank’s priorities.
Commercial and specialty lending expansion in Eastern Massachusetts, New Jersey, and New York was described as driving loan growth momentum in the acquired markets from People’s United.
Fixed asset repricing and swap book activity generated sequential margin tailwinds, though management confirmed that loan growth will be the primary driver to reach the upper end of net interest margin (NIM) guidance.
Risk discussions explicitly identified tariff impacts, softening domestic spending, and continued geopolitical uncertainty as key variables influencing capital targets and credit guidance.
Management reconfirmed the franchise’s focus on “core operating account acquisition” for sustainable deposit growth, pricing competitively but “not really” chasing costly funding for balance sheet expansion.
INDUSTRY GLOSSARY
SCB (Stress Capital Buffer): The capital buffer large banks must hold above minimum regulatory requirements, determined by Federal Reserve stress testing.
CET1 Ratio: Common equity tier one capital expressed as a percentage of risk-weighted assets, indicating core financial strength under regulatory standards.
CRE (Commercial Real Estate): Loans or exposures related to the financing of income-producing real property.
MTRCC: M&T Realty Capital Corporation, M&T’s commercial mortgage banking and credit recourse unit, including agency mortgage business.
DUS Program: Delegated Underwriting and Servicing, a Fannie Mae multifamily lending partnership model involving shared credit risk.
Net Operating Income: Earnings adjusted for notable items, reflecting core, recurring profitability.
Subservicing: Servicing residential mortgage loans on behalf of other institutions, generating fee income without balance sheet risk.
Out-of-Footprint Portfolio: Loans and assets outside the bank’s primary geographic market, typically non-core for relationship business.
Full Conference Call Transcript
Daryl Bible: Thank you, Steve, and good morning, everyone. Our purpose continues to drive M&T Bank Corporation's success. We strive to make a difference in people's lives, serving our communities with dedication and integrity. This quarter, we continued to deliver on our purpose, as we supported entrepreneurs with our small business accelerator labs, invested in our New England and Long Island communities through our third and final round of our Amplify fund, and announced several high visibility sponsorships. We remain optimistic about the ability to deliver shareholder value and continue serving our communities with excellence. Turning to Slide four. We continue to enjoy notable recognition from our customers and the industry.
I want to thank our teams in commercial, business banking, corporate trust, and wealth that made these recognitions possible. Turn to Slide six, which shows the results for the second quarter. Our second quarter results reflect M&T Bank Corporation's continued momentum with several successes to highlight. First, we are pleased with the recent stress test outcome. Our SCB declined from 3.8% to 2.7%, reflecting the resiliency and strength of our earnings power and continued risk management efforts. We started this effort five years ago to reduce our on-balance sheet CRE exposure and still serve our customers. We are also focused on reducing our criticized loans.
I want to thank both our commercial and credit teams for a great job they have done to make this happen. We executed $1.1 billion in share repurchases in the second quarter while also growing tangible book value per share by 1%. We grew average residential mortgage and consumer loans by $1.1 billion combined, reflecting our diversified business model. Fee income continues to perform well. Excluding security gains and losses and other notable items, fee income grew 11% since the second quarter of 2024. Our expenses remain well controlled, reflected in our second quarter efficiency ratio of 55.2%. Asset quality continues to improve, with a $1 billion or 11% reduction in commercial criticized balances.
Net charge-offs of 32 basis points also remain below our full-year expectations as we discussed in January. Now let's look at the specifics for the second quarter. Diluted GAAP earnings per share were $4.24, up from $3.32 in the prior quarter. Net income was $116 million compared to $584 million in the linked quarter. M&T Bank Corporation's second quarter results produced an ROA and ROCE of 1.37% and 10.39%, respectively. There were three notable items in the second quarter, including $17 million in catch-up premium amortization on tax-exempt bonds obtained from the People's United acquisition. The corresponding impact of that item on a taxable equivalent basis was $20 million. This item reduced EPS by 9¢.
We also had two gains reported within fee income, which included a $15 million pretax gain on the sale of our out-of-footprint CRE loan portfolio and a $10 million pretax gain on the sale of an ICF subsidiary. Those two gains impacted EPS by 7¢ and 4¢ respectively. Slide seven includes supplemental reporting of M&T Bank Corporation's results on a net operating or tangible basis. M&T Bank Corporation's net operating income was $724 million compared to $594 million in the linked quarter. Diluted net operating earnings per share were $4.28, up from $3.38 in the prior quarter. Net operating income yielded an ROTA and an ROTCE of 1.44% and 15.54%.
Next, we will look a little deeper into the underlying trends that generated our second quarter results. Please turn to slide eight. Actual equivalent net interest income was $1.72 billion, an increase of $15 million or 1% from the linked quarter. The net interest margin was 3.62%, a decrease of four basis points from the prior quarter. The net interest margin decline was primarily driven by a negative four basis points related to the premium amortization impact, negative five basis points related to higher cost and interest-bearing deposits, and long-term debt.
Negative two basis points from lower net free funds contribution, partially offset by a seven basis point benefit related to fixed asset repricing, including reduction and negative carry on our interest rate swaps. Excluding the notable premium amortization, the net interest margin would be 3.66%, unchanged from the first quarter. Turn to slide 10 to talk about average loans. Average loans and leases increased $600 million to $135.4 billion. Higher consumer and residential mortgage loans were partially offset by a decline in CRE balances. Commercial loans were unchanged at $61 billion, with continued growth in certain specialty segments such as C&I and mortgage warehouse, offset by a decline in dealer floor plan balances.
However, at the end of the period, commercial loans increased $1.1 billion, driven by growth in our specialty segments including C&I, mortgage warehouse, and fund banking. Similarly, we saw strong growth in total commitments. The CRE loans declined 4% to $25.3 billion, reflecting continued payoffs and paydowns. However, we continue to see our CRE pipeline build. Residential mortgage loans increased 2% to $23.7 billion. Consumer loans grew 4% to $25.4 billion, reflecting increases in recreational finance and indirect auto loans. Combined average residential mortgage and consumer loans grew $1.5 billion or 3% sequentially, representing the strength of our diversified loan portfolio and business model.
Loan yields increased five basis points to 6.11%, aided by the reduction in negative carry on our interest rate swaps. Regarding commercial loan growth, earlier this year, we implemented enhancements to our commercial credit and sales processes to improve the ability to serve customers through market cycles, become more responsive to customer needs, scale our risk management, and position ourselves for future growth. We have taken the time to assimilate both our employees and customers to this new process, and we enter the second half of the year in a strong position to support our growing pipeline. Turning to Slide 11. Our liquidity remains strong.
At the end of the second quarter, investment securities and cash held at the Fed totaled $54.9 billion, representing 26% of total assets. Average investment securities increased $900 million to $35.3 billion. The yield on investment securities decreased 19 basis points to 3.81%, primarily from the catch-up premium amortization on certain securities. Excluding that item, the securities yield would be 4.03%, reflecting continued fixed rate repricing in the investment portfolio. The duration of the investment portfolio at the end of the quarter was 3.6 years, and the unrealized pretax gain on the available-for-sale portfolio was $82 million or four basis points CET1 benefit if included in regulatory capital. Turning to slide 12.
Average total deposits rose $2.2 billion or 1% to $163.4 billion. Deposit growth was across most segments, including commercial, business banking, consumer, mortgage, and corporate trust, while average broker deposits declined $300 million to $10.5 billion. Average non-interest-bearing deposits declined $300 million to $45.1 billion, primarily from lower trust demand deposits. Interest-bearing deposit costs increased one basis point to 2.38%. Growth in certain high-cost deposits, particularly within commercial, mortgage, and corporate trust, contributed to the deposit cost increase. That was partially offset by time and broker deposits. Continuing on Slide 13, Non-interest income was $683 million compared to $611 million in the linked quarter.
We saw continued strength across many fee income categories, with increases in mortgage banking, service charges, trust, and other revenues. Mortgage banking revenues were $130 million, up from $118 million in the first quarter. Residential mortgage banking revenues increased $15 million sequentially to $97 million from higher servicing fee income aided by the full quarter benefit of subservicing, which started in February. Trust income increased $5 million to $182 million, largely driven by higher seasonal tax preparation fees. Other revenues from operations increased $240 million, reflecting $25 million in notable items mentioned earlier along with higher loan syndication fees, and merchant and credit card revenue. Turning to Slide 14. We continue to execute our expense plans.
Non-interest expenses for the quarter were $1.34 billion, a decrease of $79 million from the prior quarter. Salaries and benefits decreased $74 million to $813 million, mostly reflecting the seasonal decline from the first quarter, partially offset by the full quarter impact of annual merit increases. Other non-compensation expenses items changed relatively modestly from the first quarter. The efficiency ratio was 55.2% compared to 60.5% in the linked quarter. Now let's turn to Slide 15 for credit. Net charge-offs for the quarter totaled $108 million or 32 basis points, decreasing from 34 basis points in the linked quarter.
Net charge-offs were relatively granular, with the five largest charges amounting to less than $35 million in total, representing both C&I and CRE credits. Non-accrual loans increased $33 million or 2% to $1.6 billion. The non-accrual ratio increased two basis points to 1.16%, driven largely by higher C&I non-accruals concentrated in recreational finance dealers. In the second quarter, we reported a provision for credit losses of $125 million compared to the net charge-offs of $108 million. Included within the provision for credit losses is a $20 million provision for unfunded credit commitments, related to credit recourse obligations for certain CRE loans sold by MTRCC under the Fannie Mae DUS program.
The allowance for loan losses as a percent of total loans decreased two basis points to 1.61%, reflecting lower levels of criticized loans. Please turn to slide 16. The level of criticized loans was $8.4 billion compared to $9.4 billion at the end of March. The improvement from the linked quarter was driven by an $813 million decline in CRE criticized balances and a $226 million decline in commercial. The CRE decline was primarily within multifamily, office, healthcare, and construction, and was driven by payoffs, paydowns, and upgrades to pass status. Turning to slide 19 for capital.
M&T Bank Corporation's CET1 ratio at the end of the second quarter was an estimated 10.98% compared to 11.5% at the end of the first quarter. The decline in the CET1 ratio reflects increased capital distributions, including $1.1 billion in share repurchases, partially offset by continued strong capital generation. The AOCI impact on the CET1 ratio from AFS securities and pension-related components combined would be approximately a positive 10 basis points if included in regulatory capital. Now turning to Slide 20 for the outlook. First, let's begin with the economic backdrop. The economy fared better than expected, given the market volatility and uncertainty regarding tariffs and other policies.
The economy contracted in the first quarter as domestic production gave way to a surge of imports of consumer and business goods. We expect a positive figure in the second quarter thanks in part to lower imports but also do see slowing in domestic spending, which is a risk worth watching. We see the impact of tariffs hitting categories that are most exposed to imports. But consumers are cutting back on service spending such as travel and recreation, reducing price pressure on the service side, and is the counterweight to tariffs. We acknowledge the potential for a slowing in the economy and are attuned to downside risks and uncertainty.
We ended the second quarter well-positioned for a dynamic economic environment with strong liquidity, strong capital generation, and a CET1 ratio of nearly 11%. With that economic backdrop, let's review our net interest income outlook. We expect taxable equivalent net interest income excluding notable items to be $7 billion to $7.15 billion, with net interest margin averaging in the mid to high 360s. We lowered the range due to continued softness in commercial and CRE loan growth. We expect full-year average loan growth to be $135 billion to $137 billion. Full-year average deposit balances are expected to be $162 billion to $164 billion. We remain focused on growing customer deposits at a reasonable cost and reducing non-core funding.
Turning to fee income. We continue to expect non-interest income, excluding notable items, to be at the high end of our $2.5 billion to $2.6 billion range. Our strong quarter provides increased confidence in achieving the high end of the range. Continuing with expenses, we anticipate total non-interest expenses including intangible amortization to be $5.4 billion to $5.5 billion, trending toward the lower end of the range. Our business lines remain focused on closely managing their expenses, allowing the bank to continue to make targeted investments in projects and business opportunities that support our enterprise priorities and also achieve positive operating leverage. Regarding credit, net charge-offs for the first half of the year were below our initial expectations.
With that positive start to the year, we now expect net charge-offs for the full year to be less than 40 basis points. We also expect criticized loans to continue to decline through 2025, though at a more moderate pace. As it relates to capital, we expect to operate in a 10.75% to 11% range for the remainder of the year. We will be opportunistic with share repurchases while also continuing to monitor the economic backdrop and asset quality trends.
As shown on slide 21, we remain committed to our four priorities, including growing New England and Long Island markets, optimizing our resources through simplification, making our systems resilient and scalable, and continuing to scale and develop our risk management capabilities. To conclude on slide 22, our results underscore an optimistic investment thesis. M&T Bank Corporation has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders. We have a long track record of credit outperforming through all economic cycles and growing within the markets we serve. We remain focused on our shareholder returns and consistent dividend growth. Finally, we are a disciplined acquirer and prudent steward of shareholder capital.
Now let's open the call to questions before which the operator will briefly review the instructions.
Operator: Thank you very much, sir. Ladies and gentlemen, at this time, if you would like to ask a question, please press 1 on your telephone at this time. Again, if you do find that your question has been addressed, you may remove yourself from the queue at any time by pressing 2. We do ask that you please limit yourself to one question and one follow-up question. Go first this morning to Ken Usdin of Autonomous Research. Ken, please go ahead.
Ken Usdin: Yeah. There you go. Hey, Daryl. Good morning. How are you?
Daryl Bible: Good.
Ken Usdin: Daryl, I wanted to ask you to expand on the loan dynamics. You know, I think you did sell a portfolio of out-of-footprint CRE. I am just wondering how close are we to getting to that bottom in CRE? And are you seeing any change in terms of the, you know, underlying originations that just keeps getting taken out by payouts and the like?
Daryl Bible: Yeah. Thanks for the question on that, Ken. What I would tell you is the CRE portfolio, I think the pipeline continues to build. We had our best month in June that we have had this year so far. We had over $5 billion in the pipeline right now. We feel pretty good that we are headed in a good direction from that perspective. If you look at when it is going to grow because of the runoff that we had, you know, this past quarter, the chances of growing linked quarter in CRE would be pretty challenging.
But as we get towards the end of the year, I think as the pipeline continues to build and still serve clients and all that, I think we have a chance maybe later in the year for that to happen.
Ken Usdin: Got it. And you mentioned on capital, the good stress test result. And it is nice to see that you are kind of moving that buyback activity a little forward. Still, 10.75% to 11% is still way above where you need to sit, and you have said that maybe you would get towards 10% over time. But you know, what is the right level of capital for M&T Bank Corporation to hold? And you know, how do you think about this balancing act of all the excess you have and your potential uses of it?
Daryl Bible: Yeah. So I think it first starts with right now, you know, there is still a lot of uncertainty in the marketplace. You know, we did really well with our stress capital buffer. We did a great job bringing down our criticized loans. But we still have more wood to chop, you know, in getting our criticized loans down further and hopefully, next year, we will get down to 2.5% on a stress capital buffer. But if you look at what is in the marketplace right now, there is a lot of uncertainty with tariffs, which create a lot of trade uncertainty. You have worsening geopolitical conditions, high fiscal deficits, and elevated asset prices.
I think those risks right now just weigh out there. You know, our long-term target that the board approved in January is 10%. But I think given the risk that we have right now, you know, we think the range of 11% to 10.75% is the right place to operate.
Ken Usdin: Okay. Got it. Alright. Thanks, Daryl.
Operator: Thank you. We will go next now to Steven Alexopoulos at TD Cowen.
Steven Alexopoulos: Hey, Daryl. How is everything?
Daryl Bible: Good. And you, Steve?
Steven Alexopoulos: Good. Good. Wanted to start. So I saw you are guiding to the high end of the fee income range. And when I look at trust, there is a nice positive surprise this quarter again, $182 million. Can you get some color on what is driving that? And do we think of that as back to being high single-digit, low double-digit grower from here?
Daryl Bible: You know, it has had a tremendous last year, it has had a tremendous this year. We are actually investing in Europe. We started operations there, and it is starting to grow now. We had some big wins this past quarter in that space. So and we were asked by our customers to support them in Europe. So we are just following where our customers are from that perspective. We are very positive in our corporate trust business. I think it is growing really well and has a lot of potential. But if you look at the other fees that we have on the mortgage side, we have a great sub-servicing business that is growing really well.
You know, and we have from an origination perspective, you know, we have been investing in producers and the resi cannot see it because rates are not really down yet, but that will happen at some point down the road. And then our commercial mortgage business, RCC, is really doing well, really core to our businesses as we operate. And we will have a lot of potential. But I think the highlight that we have right now, Steve, is really in treasury management. You look at treasury management revenues year over year, we are up 12, 13%. Which is really strong.
Steven Alexopoulos: That is great. And, Daryl, I would love to get your reaction to this. So we just wrapped the PNC call, and I had asked Bill about the argument that they need more scale. And, you know, the comment was competing against the mega banks in order to drive retail deposit growth. You do need more scale. You are in a pretty unique position because you came from a much larger bank, and now you are at M&T Bank Corporation. What is your take on this? I mean, you guys have always done a good job of, you know, M&T Bank Corporation of growing retail deposits, lower cost, commercial deposits.
But do you feel more of a burning need just to get larger to compete against the mega banks which are net growing checking accounts pretty well here?
Daryl Bible: Absolutely not, Steve. I mean, if you look at our business model, you know, we are basically serving our communities, and we bring our full bank to those customers within those communities. I think that is a huge advantage for us. I think that is very successful. We also look at, you know, efficiency ratios and all that. You know, we operate with one of the best efficiency ratios in the industry. You know, and while we will continue to grow in size, one of the advantages we have and what we focus on is being simple. Less complexity in the company so we can manage the company as we get bigger and all that.
And I think that is really key. You know, we do not have to be the biggest bank to serve in our communities and all that. We just do a really great job doing that. I think everybody is happy from that. You know, we will probably grow in market, maybe contiguous markets over time when it is right. But here again, we are real compact in one area. So you get a lot of advantages of scale in those areas too. So we love our business model. It is very successful. Our communities, customers love us. I think it is going to continue to stay with that.
Steven Alexopoulos: I am with you. Thanks for that color.
Operator: Thank you. We will go next now to Chris McGratty with KBW.
Chris McGratty: Oh, great. Thanks for the question. Maybe I want to ask that tech topic from a different angle. The expense guide for the back half of the year, I know you have had this GL cost that has been nearing completion. I guess, number one, is that a part of the reason for the expense improvement? And two, I believe in the past, you have talked about needing to get that done before you consider perhaps a tuck-in, not a large-scale acquisition, but any thoughts about timing where you might be ready to do a deal with it? It affords you? Thank you.
Daryl Bible: Yeah. So we had about a half a dozen major projects going on in the company. The GL is one of them. That had nothing to do with the change in guidance. It really was, at the end of the day, we want to make sure we can contribute and have positive operating leverage. You know, and our leadership team decided that we could bend the expense curve down a little bit and flatten it out. So that we can still generate positive operating leverage. Our loan growth is not as much as we thought it would be for this plan year. We are still doing really well and hope that we finish the year out stronger.
But it is the unselfishness and the leadership that we have on our leadership team that actually made that happen.
Chris McGratty: Okay. Thank you for that, Daryl. And just a follow-up. You know, you have done a lot of progress on the CRE diversification. Does Do acquisitions, a lot of the small and community banks that you might be talking to, they have a lot of commercial real estate. Does that stop the conversation, or is there perhaps ways to work around, you know, not trying to go backwards on the improvement and create concentration? Thanks.
Daryl Bible: Yeah, Chris. There is a lot of optionality and things you can do with what has been developed. I mean, obviously, you could potentially sell credits, you know, once you close the transaction. You could do risk transfer trades. You can do a lot of things. But first and foremost, you know, to acquire somebody, we will look for somebody that basically fits with us from a culture perspective, from a credit perspective. My hope is that we would maintain most of those relationships. But if we wanted to reduce some of them or exit some of them, we do have ways of doing that or minimizing the risk. Now. So that is not a concern whatsoever.
It is just the cost of doing the transaction.
Chris McGratty: Understood. Thanks so much.
Operator: We will go next now to Ebrahim Poonawala of Bank of America.
Ebrahim Poonawala: Hey, Darrell. Good morning.
Daryl Bible: Good morning.
Ebrahim Poonawala: Just maybe one on the margin outlook. As we think about it, it is kind of in the range where you expect it to be for the full year in the mid to high three sixties. Is just remind us x any changes to interest rates. Are we at a point where incremental asset repricing is offset by funding cost? Like, how do you think about just mechanically how the should operate? Like, what brings it? What could take it above three seventy versus below three sixty, I guess? X rate changes.
Daryl Bible: Yeah. So we have kept the guidance in the mid to high three sixties. It is really it depends on how much commercial and CRE growth that we get is really the biggest driver, Ebrahim. At the end of the day. I think we are optimistic that we will be growing our commercial C&I balances third and fourth quarter that will turn positive. We are hoping that we end the year strong with CRE as well so we can start '26 really strong. As far as getting to three seventy, you know, we have a lot of positives going on in the balance sheet still. That fixed asset repricing was really huge for us this quarter.
And with our auto loans and RV loans that we put on, we put out a lot of those loans and, you know, we priced higher in those areas. Even our residential mortgages that we booked also repriced higher if you look at the yields. So all that is really positive. The investment portfolio, as we continue to invest, we are probably averaging about 150 basis points on what is rolling off to what is rolling on. We have been adding a little bit to the portfolio as well, which has been a positive. And then our swap book. Our swap book, you know, I have mentioned it a couple of times in the prepared remarks.
But we are getting positive repricing in the swap book. And you are going to continue to see that drag on for the next four quarters. So that is a positive. So wow. Is it possible to get to three seventy this year? Yes. But it is really going to rely on loan growth, Ebrahim, and right now, I am just a little cautious is why we are keeping it in the mid to high three sixties.
Ebrahim Poonawala: That is helpful. Thanks for that. And I guess maybe just on C&I loan growth, and sorry if I missed it, but remind us when we think about the opportunity within sort of the people's market in Long Island, etcetera, Just how big is that pipeline? Like, is it a multiyear thing? I mean, it has been helpful to the bank over the last year or two. So you do not mind just double-clicking on C&I loan growth, some of these markets we acquired through Peoples. Thanks.
Daryl Bible: Yeah, Ebrahim. We put, you know, lots of people, new leaders into those markets. If you look at this past quarter, Eastern Mass was one of the fastest-growing regions of our 27 regions that we had. This quarter. So it has a lot of momentum. Connecticut is also a great market for us. We have a lot of share in that space. That is a So I think all that is really good. The key thing, though, that we got from Peoples, which is kind of the whenever you do acquisitions, sometimes you get some positive intangibles. Is that we got a lot of specialty businesses like fund banking, mortgage warehouse. Corporate institutional.
And we did not have those businesses at M&T Bank Corporation. So we have been able over the last couple of years to scale those businesses, invest in those businesses, because they are really good sound businesses that we have. And we are growing them very nicely. And that is really, I think, where the growth of the second half of the year is going to come from. Is from these businesses that we have acquired from Peoples, and they continue to grow and really pay dividends for us.
Ebrahim Poonawala: That is helpful. Thanks, Adam.
Operator: Thank you. We will go next now to Peter Winter of D. A. Davidson.
Peter Winter: Hi. Good morning. Daryl. The consumer loan growth has really been consistently strong. I am just wondering would you expect some of that growth maybe to moderate just as discretionary spending is slowing and consumer prices are starting to rise as some of these tariff pass-throughs are just starting.
Daryl Bible: Yeah. So, you know, the big amount of loans that we had in indirect RV and in our auto, you know, was basically, you know, just people buying ahead of before higher car prices or RV prices came on board. So that was a pull forward. But, you know, I think in the RV space, talking to our leader, Drew Mike Drury in that space. He is pretty optimistic that RV will continue. Auto as well. Auto, it really depends on which manufacturers and what is going on the lots. That is actually hurt us on the commercial side beyond floor planning because our utilization is down.
But as manufacturers, you know, figure out where to make the cars and put them on the lots, I think that will be a positive for both sides of us as we move forward. So I think that is good. One of the nice surprises, though, that we have, and I really give a call out to Rich McCarthy who ran the branches and all that is, you know, we actually grew HELOC for the first time in a while in our credit card book this past quarter. And they believe they are pretty optimistic for the rest of the year. So that is a huge positive for us.
So we have a lot of really good things going on in that space today.
Peter Winter: Got it. Thank you. And then separately, last quarter, you lowered the average deposit range. But you mentioned that you expected to be at the high end of that new range. And I was just wondering with average deposits at $162 billion in the first half of the year, do you still expect to be at that upper end of that range of $162 billion to $164 billion?
Daryl Bible: You know, Peter, we will, you know, we I have we have an always on. We always pay competitive rates to our customers. As they come in. We will get our share from that perspective. We had a great quarter this quarter. We grew $2.2 billion, you know, of what we brought in it was from mortgage, our corporate trust business, as well as commercial. But it was really nice growth. It allowed us to pay off some broker deposits and some other non-core funding. Is what I am all about. So I would continue to focus on growing as much as we can as long as we grow it at a competitive reasonable rate. At that sense.
And we will fund loans with it. And then if we have not, you know, more than what we need there, we will pay down non-core funding, which is what we have been doing. So it is a positive, and I think we will continue to see growth in that sector.
Peter Winter: Got it. Okay. Thanks, Daryl.
Operator: Thank you. We will go next now to John Pancari at Evercore ISI.
John Pancari: Morning, Daryl.
Daryl Bible: Hey. Good morning, Johnny.
John Pancari: You know, just to go back to capital, a couple of things there. I see the acceleration in the buybacks to the $1.1 billion level up from the $607 million before that. Can you maybe give us your thoughts on the pace of buybacks through the remainder of the year? I believe you had indicated the $4 billion authorization could be completed over six quarters. Are you still on that type of pace as you look at it? And then separately, I know M&A has been brought up a couple of times. And you mentioned that you may be interested when the time is right.
I guess, you could just talk about it, anything about the evolving backdrop with the other regional starting to do deals that has made whole bank M&A any more interesting to you, or would you say your no change in your outlook on that perspective today?
Daryl Bible: Yeah. So, John, I mean, we are always looking and talking to people and all that. So, I mean, that is just part of what we do. We do not really have anything known. Obviously, we would not say anything, but, you know, opportunities are right and when we find a partner, you know, that really fits us for all the various reasons, you know, that will happen when it happens. It has happened 27 times since the early eighties, so I am sure it will happen at some point down the road. From that perspective.
Now as far as the pace goes, you know, I would say we will probably operate, you know, at 11, you know, and if the economy, you know, if we get more constructive on the economy and feel good about it, we could go down to 10.75% at some point. Down the road. If you look at what we have done, you know, for the first half of the year, John, and we bought 5.7% of our shares outstanding in the first and second quarter. So we are buying a fair amount of stock back.
From that perspective, and I think our investors would be happy that we would continue to do that, you know, when it makes sense from that perspective.
John Pancari: Okay. Got it. Alright. Thanks, Charles. And then just separately, back to the NII guide. I know you regarding the lowering of the lower bound of that guide that you discussed TRE is a factor and mentioned that already. You also mentioned C&I. Can you just give us a little bit more detail in terms of what you are seeing on the C&I front? That is contributing still to the sluggishness, or are you beginning to see some green shoots there? Thanks.
Daryl Bible: Yeah. I think if you look at C&I, I mean, our fastest growth regions besides Eastern Mass was in Jersey and New York. They were all really positive, which is really good. You know, I would say if we have a really good growth among many of our portfolios, Pipeline and middle market continues to be robust. You know, as far as line utilization and dealer commercial services, that is low now. That could start to drift back up towards the end of the year. That could be a positive for us. I think that would be good. You know? And then as far as uncertainty of paydowns and all that, it has been relatively strong to date.
You know, that pace will probably moderate at some point, you know, whether it is this quarter or next quarter, it is hard to call when that moderates, but it is going to happen at some point, and then that will bring more natural growth to the portfolio. But our specialty businesses specifically C&I, mortgage warehouse, and Fund Banking are operating really strong. And, you know, our RMs are out there calling and, you know, with our customers and very active in our pipelines both in commercial and CRE are building and continuing to get stronger. So I think we are optimistic. You know, I am just a little bit cautious to be honest with you.
I think you know that about me, John. So but you know, I think we will have some good green shoots, and it will actually pay dividends.
John Pancari: Great. Alright. Thank you, Daryl.
Operator: Thank you. We will go next now to Manan Ghisalia at Morgan Stanley.
Manan Ghisalia: Hey. Good morning. Good morning. Daryl, just a follow-up on the capital return question. Is we think about the back half of the year, how much of a priority is raising the dividend? So I know it is a board decision, but M&T Bank Corporation's dividend yield is below peers. So is that more of a focus than buybacks?
Daryl Bible: They are both really important. I mean, when I look at how we allocate capital, you know, first and foremost, allocate to our customers organically. Secondly, I put dividends in there to make sure we can pay a strong growing dividend and make it repeatable over time. You will see some action out of our board this quarter. So I think you will be pleased when the board votes on that and we make our public, you know, press release on it. Then after dividends, we will look at organic and then after that, we buy back. Buy back is probably at the end.
Manan Ghisalia: Got it. Very helpful. And then on NIM, can you talk about what drove that five basis point headwind to NIM from higher liability costs? You know, I know you spelled out a few categories on the deposit side where costs went up. Q on Q. But I was hoping you could give us some more color on that, you know, how much of that is one-time in nature versus what could be some more sticky, I guess, pressure on those funding costs?
Daryl Bible: So it really was not sticky funding costs and all that. We actually, you know, asked for and brought in these deposits. The average cost came in at around $3.90 to $4.40. You know, we view that as something less than our marginal funding curve. So it is we are not fluid in that when you bring a deposit in, you cannot pay off a borrowing. You know, you have to do it over time to rightsize it. But it came in and made sense to come on our balance sheet because it is under the funding curve, and we do not need it to fund loans. We will pay off more non-core funding with that growth.
So it is the right thing to do. We are always taking it from our customers and paying fair rates, reasonable rates from that perspective. I think this was a great quarter for us for our ability to attract these good funds in and we got them at a really good cost. It is just it is higher than the average of the interest-bearing cost that we have just because we have, you know, a lot lower rates in certain categories. But these marginal deposits actually were good for us.
Manan Ghisalia: So from a total funding cost perspective, it sounds like it is a little bit more of a timing difference than anything else.
Daryl Bible: It is. That is exactly right, Manan.
Manan Ghisalia: Got it. Thank you.
Operator: Thank you. We will go next now to Bill Carcache at Wolfe Research.
Bill Carcache: Hey. Good morning, Daryl. Following up on your diversification strategy as your CRE mix falls and you get bigger in C&I and consumer. How much room is there to increase your C&I and consumer mix? From here as we look ahead?
Daryl Bible: Yeah. Bill, you know, we will continue to grow and, you know, our C&I and, you know, right now, our CRE businesses have been shrinking. We are trying to stabilize that and grow that. You know, we actually like the mixes that we have today. Right now, if you look at CRE, it is I think it is under 20%, closer to 18 or 19%. You know? So that actually has room to maybe grow a little bit from that perspective. C&I, you know, we are obviously trying to grow that as much as we can. You know, in our markets that we serve as well as in our specialty businesses. That we operate in.
I think that is really good. And we also want to continue to grow our consumer portfolios. We like the diversity that we have and what it gives us. And I think it is a good mix for us, and we will be tilted a little bit more on the consumer side. So you might see us run with a little bit higher allowance ratios just because of charge-offs. Net overall, the risk-adjusted spreads are strong.
Bill Carcache: Thanks. That is helpful, Daryl. And then following up on your comments around the increase in your interest-bearing deposit cost to the extent that loan growth were to further accelerate from here, is there room to let your loan growth outpace your deposit growth for a time, or do you envision having to pay up a little bit more for deposits?
Daryl Bible: I would say we will always continue to be consistent in trying to attract deposits at the right price. From that perspective. And, you know, we have been very successful, and I think we can do that and manage that with the loan growth that we are going to have. I do not view that as an issue one way or the other. Pricing up, you know, is not really something we really do at M&T Bank Corporation that much, to be honest with you. We give fair prices more consistently.
Bill Carcache: Helpful. Thanks. Thanks very much.
Operator: We will go next now to Erica Najarian of UBS.
Erica Najarian: Hi. Good morning. Or afternoon. Just following up with a question on capital. You mentioned you would like to operate around 11%. And cited some economic and macro factors. As we think about the difference between you guys operating around 11% and, like, B of A operating around 11%, how much are the ratings agents versus the regulators playing a part in how regional banks like M&T Bank Corporation are setting their targets?
Daryl Bible: You know, rating agencies definitely have some say in that as well as the regulators and, you know, other constituencies too. You know, from our perspective, though, you know, we have been on a journey to de-risk the company. I think our stress capital buffer that came out really showed the progress that we made with that. And, you know, with us still continuing to shrink our criticized book, you know, we have a shot, you know, at even improving from where we are, you know, next year. So I think we are getting more aligned with, you know, where we want to operate with and feel more comfortable.
And when you do that, you know, the rating agencies take notice of that and acknowledge that. Because this is the one test that all banks take at the same time, and they can compare you against everybody else from that perspective. So that is why it is a good test out there. And I think we will continue to make great progress from that.
Erica Najarian: Got it. And just to clarify, you know, your deposit cost did increase in your response to Manan. You mentioned that you did, you know, gather deposits at more wholesale rates that were sort of under your funding cost. In terms of core deposit competition, how is that faring underneath the surface? And you know, we clearly just had some headlines as you guys are running this call about Chair Powell. How should we think about deposit competition in the scenario of, you know, more cuts versus, you know, a scenario of maybe a prolonged hold from the Fed?
Daryl Bible: Yeah. So, Erica, I mean, we have six, you know, businesses. And all of our businesses first and foremost, come with the mindset that, you know, to attract new customers, we want to get operating accounts. And that is first and foremost to us. When you look at the tracking of what our businesses do and, you know, what we generate, we generate lots of new operating accounts each and every month and every quarter. That we have. And we track that, and we draft we really value that. Once you get the operating account, that opens up other channels so you can get other services, other deposit products, other loan products, and all that.
But that is first and foremost the core to us. So, I mean, the value of M&T Bank Corporation, one of the biggest things we have is our core deposit franchise, and it starts with the operating accounts that we have from that. So I think that is really what we focus on. And then we pay competitive rates, you know, to our customers to get more share of the wallet over time. But getting the operating account is really first and foremost, and we have been very successful and will continue to be successful in accomplishing that.
Erica Najarian: Got it. Thanks.
Operator: Thank you. We will go next now to Matt O'Connor with Deutsche Bank.
Matt O'Connor: Good morning. Most of my questions have been answered, but just looking at the criticized C&I and CRE loans on Slide 16, obviously, is, you know, one of the things that rating agencies look at, one of the things we look at. This big drop that you are down to eight and a half or $8.4 billion, how does that compare to a few years ago? Do not know if you have anything handy. I am just trying to figure out, like, are we back to more normalized levels or pre-fed hike levels? Or trying to frame the current levels? Thanks.
Daryl Bible: Yeah. So I would say we probably peaked a few years ago. You know, at our highest level, at least. The history that I have seen here at M&T Bank Corporation. And we have been coming down for the last couple of years nicely. I think our goal is to continue to come down, you know, over the next year or two. To levels that, you know, maybe be a little bit lower than where we operate today. But we are making great progress and doing really well. From that. So I think that has been really good.
But, you know, I think overall, you know, we will be back down in the next couple of years to something that is probably half of where we peaked.
Matt O'Connor: Yeah. Okay. And then the MIOS reserve, the $20 million for unfunded credit commitments, did you comment on what that related to? Or is that maybe a little conservatism expecting growth in the future? What is that for?
Daryl Bible: Yeah. So we have our MTRCC business. It, you know, has relationships with all the agencies. Specifically, there is one program with Fannie Mae that we have where, you know, we sell loans to them. We remain a third of the risk is on our balance sheet and two-thirds is on their balance sheet. And we have been in this business since 2002/2003, and, you know, today, have until this quarter had very minimal losses at all in this portfolio. I think over that twenty-two-year time period, had $7 million of net charge-offs. This quarter, alright, and up until this quarter.
This quarter, we had four clients come through, you know, and the provision is $20 million, but the charge-off we took is closer to $15 or $16 million. So far that we have. And they are all very unique clients. One client focuses on manufactured housing with pads. Fannie Mae actually had a special program called pilot, where they were targeting these customers. They have now discontinued that program and, you know, we are just, you know, basically sharing the losses with the agency on this transaction. Another one involved a multifamily project with a university and the university, you know, was housing students. And it was for foreign students.
And now that the need for foreign students is not there anymore, that project is not as profitable as it was before. And then another one is a senior living facility. And the other one was just a renovation that had bad luck and had fire and flood issues and behind schedule. I think there are one-offs. I think we expect to have, you know, our allowance and reserves for this business to go back to where it was before. A go-forward basis. MTRCC is really important to our strategy in the CRE space. You know, we can serve a lot of clients with permanent financing.
I signed to the agencies and keep it off our balance sheet and just make it a fee income perspective for us. So we love the business. You know, one quarter does not mean much, and that, you know, we had some losses here, but long term, it has been a great business and will be a great business for M&T Bank Corporation as we move forward.
Matt O'Connor: Okay. Thank you.
Operator: And we will go next now to Gerard Cassidy of RBC Capital Markets.
Gerard Cassidy: Hi, Daryl.
Daryl Bible: Hey, Jared.
Gerard Cassidy: Daryl, can you give us some thoughts on how you guys are looking at the expectation that stablecoins, once the coin act is passed down in Washington, may impact your payments business or deposit gathering? How are you guys approaching, you know, adopting, you know, a digital currency as part of your offerings for your customers?
Daryl Bible: Yeah. So we have a group of people that are looking at this. And, you know, obviously, you know, a stablecoin could be a payment rail that people could use potentially. You know, and then maybe do it for cross-border trading if you want to. I think from our perspective, for people to adopt that, it has got to be something that is easier than what we have today and that it is less expensive to move the money than what we have today. You know, some of the usage that you see happening right now is doing the off hours when banking hours are closed.
So late at nights or on weekends, I think people are using this type of payment rule for that piece. You know, we will see how much it develops over time. Obviously, you know, we will continue to monitor this. Probably partner with some folks over time to participate in this space if our customers want this product, we will be there to service. And serve it to them.
Gerard Cassidy: Very good. And then circling back, to the net charge-off guidance, if I heard it correctly, it is less than 40 basis points, which is a modest improvement from the beginning of the year. And you guys pointed out that charge-offs are coming in less than expected. Any color on where you are seeing, you know, the charge-offs today versus what you expected? At the beginning of the year, what is savings of the portfolio doing better than expected?
Daryl Bible: Yeah. So year to date, we are 33 basis points right now. So, you know, can it be 40? Yes. But I think that is we are just very cautious right now. Just because of the uncertainty in the marketplace. The tariff issues are still out there. I talked about all these other risks that are still out there. That could impact. And we are just being a little cautious with some of our guidance. We may come in and, you know, be much better than that. But right now, we feel comfortable that it is under 40, but we do not really know how much under 40 yet.
Gerard Cassidy: I see. And then just a quick follow-up on the sale of the commercial real estate that you guys had, the $15 million gain. Any color there on the buyer or the types of loans that were sold?
Daryl Bible: I mean, it was an out-of-footprint business. It was really a business decision. Because we really did not have relationships with these customers. We just had loans with them. Because it was not in our footprint. And, you know, from a credit perspective, you know, they performed very well. Credit, that is why we got a gain on the sale. From that. But it was in the CRE space. From that perspective, but I think long term, we can deploy that capacity that we sold out to our core clients, you know, within our footprint. And have more wholesome relationships. With that space. So it is an M&T Bank Corporation thing. It is a long-term trade.
To do the right thing.
Gerard Cassidy: Very good. Thank you.
Operator: And, gentlemen, it appears we have no further questions today. Mister Wendelboe, I would like to turn things back to you for any closing comments, sir.
Steve Wendelboe: Again, thank you all for participating today. And as always, if clarification is needed, please contact our Investor Relations department at (716) 842-5138. Thanks.
Operator: Thank you. Again, ladies and gentlemen, this will conclude the M&T Bank Corporation second quarter 2025 earnings conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.